Exhibit
      10.5

     

    THE
      SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE
      U.S. SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE OR FOREIGN
      JURISDICTION, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED
      PURSUANT TO THE RELEVANT PROVISIONS OF U.S. FEDERAL AND STATE OR APPLICABLE
      FOREIGN SECURITIES LAWS OR IF THE COMPANY IS PROVIDED AN OPINION OF COUNSEL
      SATISFACTORY TO THE COMPANY THAT REGISTRATION AND QUALIFICATION UNDER U.S.
      FEDERAL AND STATE OR APPLICABLE FOREIGN SECURITIES LAWS IS NOT
      REQUIRED.

     

    
      PACIFIC
        RESTAURANT HOLDINGS, INC.

       

    

    2007
      STOCK INCENTIVE PLAN

    NOTICE
      OF STOCK OPTION GRANT

     

    Pacific
      Restaurant Holdings, Inc. (the
      “Company”) hereby grants you the following Option to purchase shares of its
      common stock (“Shares”). The terms and conditions of this Option are set forth
      in the Stock Option Agreement and the Pacific
      Restaurant Holdings, Inc. 2007 Stock
      Incentive Plan (the “Plan”), both of which are attached to and made a part of
      this document.

     

    
      	
              Date
                of Grant:

            	
              [Date
                of Grant]

            
	 	 
	
              Name
                of Optionee:

            	
              [Name
                of Optionee]

            
	 	 
	
              Number
                of Option Shares:

            	
              [Number
                of Shares]

            
	 	 
	
              Exercise
                Price per Share:

            	
              $[Exercise
                Price]
                (The Exercise Price per Share of an Option shall not be less than
                one
                hundred percent (100%) of the Fair Market Value of a Share on the
                date of
                grant. If Optionee is a Ten-Percent Stockholder, the Exercise Price
                per
                Share of an ISO must be at least one hundred ten percent (110%) of
                Fair
                Market Value.)

            
	 	 
	
              Vesting
                Start Date:

            	
              [Vesting
                Start Date]

            
	 	 
	
              Type
                of Option:

            	
              [Type
                of Grant: NSO/ISO]

            
	 	 
	
              Vesting
                Schedule:

            	
              Subject
                to the terms and conditions set forth in Section 2 of the Stock Option
                Agreement, the Option vests with respect to the first 25% of the
                Shares
                when the Optionee completes 12 months of continuous Service after the
                Vesting Start Date, and with respect to an additional 1/48th of the
                Shares
                when the Optionee completes each full month of continuous Service
                thereafter.

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    By
      signing this document, you acknowledge receipt of a copy of the Plan, and agree
      that (a) you have carefully read, fully understand and agree to all of the
      terms
      and conditions described in the attached Stock Option Agreement, the Plan
      document and “Notice of Exercise and Common Stock Purchase Agreement” (the
“Exercise Notice”); (b) you hereby make the purchaser’s investment
      representations contained in the Exercise Notice with respect to the grant
      of
      this Option; (c) you understand and agree that the Stock Option Agreement,
      including its cover sheet and attachments, constitutes the entire understanding
      between you and the Company regarding this Option, and that any prior
      agreements, commitments or negotiations concerning this Option are replaced
      and
      superseded; and (d) you have been given an opportunity to consult your own
      legal
      and tax counsel with respect to all matters relating to this Option prior to
      signing this cover sheet and that you have either consulted such counsel or
      voluntarily declined to consult such counsel.

     

    
      	
              [NAME
                OF OPTIONEE]

            	 	 	
              PACIFIC
                RESTAURANT HOLDINGS, INC.

            
	 	 	 	 
	 	 	 	 
	
            	 	 	By:
	 

              

            	 	 	
              
                

              

              Its: 

               

              
                

              

              
              

            


    

     

    
      PACIFIC
        RESTAURANT HOLDINGS, INC.

      NOTICE
        OF
        STOCK OPTION GRANT

    

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    

      PACIFIC
        RESTAURANT HOLDINGS, INC. 

    

     

    2007
      STOCK INCENTIVE PLAN

     

    STOCK
      OPTION AGREEMENT

     

    SECTION 1. KIND
      OF OPTION.

     

    This
      Option is intended to be either an incentive stock option intended to meet
      the
      requirements of section 422 of the Internal Revenue Code (an “ISO”) or a
      non-statutory option (an “NSO”), which is not intended to meet the requirements
      of an ISO, as indicated in the Notice of Stock Option Grant. Even if this Option
      is designated as an ISO, it shall be deemed to be an NSO to the extent required
      by the $100,000 annual limitation under Section 422(d) of the
      Code.

     

    SECTION 2. VESTING.

     

    Subject
      to the terms and conditions of the Plan and this Stock Option Agreement (the
      “Agreement”), your Option will be exercisable with respect to the Shares that
      have become vested in accordance with the schedule set forth in the Notice
      of
      Stock Option Grant. If your Option is granted in consideration of your Service
      as an Employee or a Consultant, after your Service as an Employee or a
      Consultant terminates for any reason, vesting of your Shares subject to such
      Option immediately stops and such Option expires immediately as to the number
      of
      Shares that are not vested as of the date your Service as an Employee or a
      Consultant terminates. If your Option is granted in consideration of your
      Service as an Outside Director, after your Service as an Outside Director
      terminates for any reason, vesting of your Shares subject to such Option
      immediately stops and such Option expires immediately as to the number of Shares
      that are not vested as of the date your Service as an Outside Director
      terminates.

     

    SECTION 3. TERM.

     

    Your
      Option will expire in any event at the close of business at Company headquarters
      on ten (10) years after the Date of Grant; provided, however, that if your
      Option is an ISO it will expire five (5) years after the Date of Grant if you
      are a Ten-Percent Stockholder of the Company (the “Expiration Date”). Also, your
      Option will expire earlier if your Service terminates, as described
      below.

     

    SECTION 4. REGULAR
      TERMINATION.

     

    
      	 	
              (a)

            	
              If
                your Service terminates for any reason except death or Disability,
                the
                vested portion of your Option will expire at the close of business
                at
                Company headquarters on the date three (3) months after your termination
                of Service. During that three (3) month period, you may exercise
                the
                portion of your Option that was vested on your termination date.
                Notwithstanding the foregoing, the Option may not be exercised after
                the
                Expiration Date determined under Section 3
                above.

            


    

    
      
         

        PACIFIC
          RESTAURANT HOLDINGS, INC.

        STOCK
          OPTION AGREEMENT

      

    

    
      
        
        

      

      
        -1-

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (b)

            	
              If
                your Option is an ISO and you exercise it more than three months
                after
                termination of your Service as an Employee for any reason other than
                death
                or Disability expected to result in death or to last for a continuous
                period of at least twelve (12) months, your Option will cease to
                be
                eligible for ISO tax treatment.

            


    

     

    
      	 	
              (c)

            	
              Your
                Option will cease to be eligible for ISO tax treatment if you exercise
                it
                more than three months after the 90th day of a bona fide leave of
                absence
                approved by the Company, unless you return to employment immediately
                upon
                termination of such leave or your right to reemployment after your
                leave
                was guaranteed by statute or
                contract.

            


    

     

    SECTION 5. DEATH.

     

    If
      you
      die while in Service with the Company, the vested portion of your Option will
      expire at the close of business at Company headquarters on the date twelve
      (12)
      months after the date of your death. During that twelve (12) month period,
      your
      estate, legatees or heirs may exercise that portion of your Option that was
      vested on the date of your death. Notwithstanding the foregoing, the Option
      may
      not be exercised after the Expiration Date determined under Section 3
      above.

     

    SECTION 6. DISABILITY.

     

    
      	 	
              (a)

            	
              If
                your Service terminates because of a Disability, the vested portion
                of
                your Option will expire at the close of business at Company headquarters
                on the date twelve (12) months after your termination date. During
                that
                twelve (12) month period, you may exercise that portion of your Option
                that was vested on the date of your Disability. “Disability” means that
                you are unable to engage in any substantial gainful activity by reason
                of
                any medically determinable physical or mental impairment. Notwithstanding
                the foregoing, the Option may not be exercised after the Expiration
                Date
                determined under Section 3
                above.

            


    

     

    
      	 	
              (b)

            	
              If
                your Option is an ISO and your Disability is not expected to result
                in
                death or to last for a continuous period of at least twelve (12)
                months,
                your Option will be eligible for ISO tax treatment only if it is
                exercised
                within three (3) months following the termination of your Service
                as an
                Employee.

            


    

     

    SECTION 7. EXERCISING
      YOUR OPTION.

     

    To
      exercise your Option, you must execute the Notice of Exercise and Common Stock
      Purchase Agreement (the “Exercise Notice”), attached as Exhibit A.
      You
      must submit this form, together with full payment, to the Company. Your exercise
      will be effective when it is received by the Company. If someone else wants
      to
      exercise your Option after your death, that person must prove to the Company’s
      satisfaction that he or she is entitled to do so.

    
      
        


        PACIFIC
          RESTAURANT HOLDINGS, INC.

        STOCK
          OPTION AGREEMENT

      

    

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

    SECTION 8. PAYMENT
      FORMS.

     

    When
      you
      exercise your Option, you must include payment of the Exercise Price for the
      Shares you are purchasing in cash or cash equivalents. Alternatively, you may
      pay all or part of the Exercise Price by surrendering, or attesting to ownership
      of, Shares already owned by you, unless such action would cause the Company
      to
      recognize any (or additional) compensation expense with respect to the Option
      for financial reporting purposes. Such Shares shall be surrendered to the
      Company in good form for transfer and shall be valued at their Fair Market
      Value
      on the date of Option exercise. To the extent that a public market for the
      Shares exists and to the extent permitted by applicable law, in each case as
      determined by the Company, you also may exercise your Option by delivery (on
      a
      form prescribed by the Company) of an irrevocable direction to a securities
      broker to sell Shares and to deliver all or part of the sale proceeds to the
      Company in payment of the aggregate Exercise Price and, if requested, applicable
      withholding taxes. The Company will provide the forms necessary to make such
      a
      cashless exercise. The Board may permit such other payment forms as it deems
      appropriate, subject to applicable laws, regulations and rules.

     

    SECTION 9. TAX
      WITHHOLDING AND REPORTING.

     

    
      	 	
              (a)

            	
              You
                will not be allowed to exercise this Option unless you pay, or make
                acceptable arrangements to pay, any taxes required to be withheld
                as a
                result of the Option exercise or the sale of Shares acquired upon
                exercise
                of this Option. You hereby authorize withholding from payroll or
                any other
                payment due you from the Company or your employer to satisfy any
                such
                withholding tax obligation. 

            


    

     

    
      	 	
              (b)

            	
              If
                you sell or otherwise dispose of any of the Shares acquired pursuant
                to an
                ISO on or before the later of (i) two years after the grant date, or
                (ii) one year after the exercise date, you shall immediately notify
                the Company in writing of such
                disposition.

            


    

     

    SECTION 10. RIGHT
      OF FIRST REFUSAL.

     

    In
      the
      event that you propose to sell, pledge or otherwise transfer to a third party
      any Shares acquired under this Agreement, or any interest in such Shares, the
      Company shall have a “Right of First Refusal” with respect to such Shares in
      accordance with the provisions of the Exercise Notice.

     

    SECTION 11. RESALE
      RESTRICTIONS/MARKET STAND-OFF.

     

    In
      connection with any underwritten public offering by the Company of its equity
      securities pursuant to an effective registration statement filed under the
      U.S.
      Securities Act of 1933, as amended, including the Company’s initial public
      offering, you may be prohibited from engaging in any transaction with respect
      to
      any of the Company’s common stock without the prior written consent of the
      Company or its underwriters in accordance with the provisions of the Exercise
      Notice.

    
      
        


        PACIFIC
          RESTAURANT HOLDINGS, INC.

        STOCK
          OPTION AGREEMENT

      

    

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

     

    SECTION 12. TRANSFER
      OF OPTION.

     

    Prior
      to
      your death, only you may exercise this Option. This Option and the rights and
      privileges conferred hereby cannot be sold, pledged or otherwise transferred
      (whether by operation of law or otherwise) and shall not be subject to sale
      under execution, attachment, levy or similar process. For instance, you may
      not
      sell this Option or use it as security for a loan. If you attempt to do any
      of
      these things, this Option will immediately become invalid. You may, however,
      dispose of this Option in your will. Regardless of any marital property
      settlement agreement, the Company is not obligated to honor an Exercise Notice
      from your spouse or former spouse, nor is the Company obligated to recognize
      such individual’s interest in your Option in any other way. Notwithstanding the
      foregoing, however, to the extent permitted by the Board in its sole discretion,
      an NSO may be transferred by you to a revocable trust or to one or more family
      members or to a trust established for your benefit and/or one or more of your
      family members to the extent permitted by the Plan.

     

    SECTION 13. RETENTION
      RIGHTS.

     

    This
      Agreement does not give you the right to be retained by the Company in any
      capacity. The Company reserves the right to terminate your Service at any time
      and for any reason without thereby incurring any liability to you.

     

    SECTION 14. STOCKHOLDER
      RIGHTS.

     

    Neither
      you nor your estate or heirs have any rights as a stockholder of the Company
      until a certificate for the Shares acquired upon exercise of this Option has
      been issued. No adjustments are made for dividends or other rights if the
      applicable record date occurs before your stock certificate is issued, except
      as
      described in the Plan.

     

    SECTION 15. ADJUSTMENTS.

     

    In
      the
      event of a stock split, a stock dividend or a similar change in the Company’s
      Stock, the number of Shares covered by this Option and the Exercise Price per
      share may be adjusted pursuant to the Plan. Your Option shall be subject to
      the
      terms of the agreement of merger, liquidation or reorganization in the event
      the
      Company is subject to such corporate activity as set forth in the
      Plan.

     

    SECTION 16. LEGENDS.

     

    All
      certificates representing the Shares issued upon exercise of this Option shall,
      where applicable, have endorsed thereon the following legends:

     

    THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED OR QUALIFIED
      UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
      ANY
      STATE OR FOREIGN JURISDICTION, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED
      AND QUALIFIED PURSUANT TO THE RELEVANT PROVISIONS OF U.S. FEDERAL AND STATE
      OR
      APPLICABLE FOREIGN SECURITIES LAWS OR IF THE COMPANY IS PROVIDED AN OPINION
      OF
      COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION AND QUALIFICATION UNDER
      U.S. FEDERAL AND STATE OR APPLICABLE FOREIGN SECURITIES LAWS IS NOT
      REQUIRED.

    
      


      PACIFIC
        RESTAURANT HOLDINGS, INC.

      STOCK
        OPTION AGREEMENT

    

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

     

    THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED,
      ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS
      OF
      A WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE INITIAL HOLDER HEREOF. SUCH
      AGREEMENT PROVIDES FOR CERTAIN TRANSFER RESTRICTIONS, INCLUDING RIGHTS OF FIRST
      REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SECURITIES. THE SECRETARY OF THE
      COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER
      HEREOF WITHOUT CHARGE.

     

    If
      the Option is an ISO, then the following legend should be
      included:

     

    THE
      SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED UPON EXERCISE OF AN INCENTIVE
      STOCK OPTION, AND THE COMPANY MUST BE NOTIFIED IF THE SHARES SHALL BE
      TRANSFERRED BEFORE THE LATER OF THE TWO (2) YEAR ANNIVERSARY OF THE DATE OF
      GRANT OF THE OPTION OR THE ONE (1) YEAR ANNIVERSARY OF THE DATE ON WHICH THE
      OPTION WAS EXERCISED. THE REGISTERED HOLDER MAY RECOGNIZE ORDINARY INCOME IF
      THE
      SHARES ARE TRANSFERRED BEFORE SUCH DATE.

     

    SECTION 17. TAX
      DISCLAIMER.

     

    You
      agree
      that you are responsible for consulting your own tax advisor as to the tax
      consequences associated with your Option. The tax rules governing options are
      complex, change frequently and depend on the individual taxpayer’s situation.
      For your information, a memorandum that briefly summarizes current U.S. federal
      income tax law relating to certain aspects of stock options is attached hereto
      as Exhibit B. Please note that this memorandum does not purport to be complete.
      Although the Company will make available to you general tax information about
      stock options, you agree that the Company shall not be held liable or
      responsible for making such information available to you and any tax or
      financial consequences that you may incur in connection with your
      Option.

     

    In
      addition, as noted in Exhibit B, options granted at a discount from fair market
      value may be considered “deferred compensation” subject to adverse tax
      consequences under new Section 409A of the Internal Revenue Code, which is
      generally effective January 1, 2005. The Board has made a good faith
      determination that the exercise price per share of the Option is not less than
      the fair market value of the Shares underlying your Option on the Date of Grant.
      It is possible, however, that the Internal Revenue Service could later challenge
      that determination and assert that the
      fair
      market value of the Shares underlying your Option was greater on the Date of
      Grant than the exercise price determined by the Board,
      which could result in immediate income tax upon the vesting of your Option
      (whether or not exercised) and a 20% tax penalty, as well as the loss of
      incentive stock option status (if applicable). The Company gives no assurance
      that such adverse tax consequences will not occur and specifically assumes
      no
      responsibility therefor. By accepting this Option, you acknowledge that any
      tax
      liability or other adverse tax consequences to you resulting from the grant
      of
      the Option will be the responsibility of, and will be borne entirely by,
      you.  YOU ARE THEREFORE ENCOURAGED TO CONSULT YOUR OWN TAX ADVISOR BEFORE
      ACCEPTING THE GRANT OF THIS OPTION.

    
       

      PACIFIC
        RESTAURANT HOLDINGS, INC.

      STOCK
        OPTION AGREEMENT

    

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

    SECTION 18. THE
      PLAN AND OTHER AGREEMENTS.

     

    The
      text
      of the Plan is incorporated in this Agreement by reference. Certain capitalized
      terms used in this Agreement are defined in the Plan. The Notice of Stock Option
      Grant, this Agreement, including its attachments, and the Plan constitute the
      entire understanding between you and the Company regarding this Option. Any
      prior agreements, commitments or negotiations concerning this Option are
      superseded.

     

    SECTION 19. MISCELLANEOUS
      PROVISIONS

     

    
      	 	
              (a)

            	
              You
                understand and acknowledge that (i) the Plan is entirely
                discretionary, (ii) the Company and your employer have reserved the
                right to amend, suspend or terminate the Plan at any time, (iii) the
                grant of an option does not in any way create any contractual or
                other
                right to receive additional grants of options (or benefits in lieu
                of
                options) at any time or in any amount and (iv) all determinations
                with respect to any additional grants, including (without limitation)
                the
                times when options will be granted, the number of Shares offered,
                the
                Exercise Price and the vesting schedule, will be at the sole discretion
                of
                the Company.

            


    

     

    
      	 	
              (b)

            	
              The
                value of this Option shall be an extraordinary item of compensation
                outside the scope of your employment contract, if any, and shall
                not be
                considered a part of your normal or expected compensation for purposes
                of
                calculating severance, resignation, redundancy or end-of-service
                payments,
                bonuses, long-service awards, pension or retirement benefits or similar
                payments.

            


    

     

    
      	 	
              (c)

            	
              You
                understand and acknowledge that participation in the Plan ceases
                upon
                termination of your Service for any reason, except as may explicitly
                be
                provided otherwise in the Plan or this
                Agreement.

            


    

     

    
      	 	
              (d)

            	
              You
                hereby authorize and direct your employer to disclose to the Company
                or
                any Subsidiary any information regarding your employment, the nature
                and
                amount of the your compensation and the fact and conditions of your
                participation in the Plan, as your employer deems necessary or appropriate
                to facilitate the administration of the
                Plan.

            


    

     

    
      PACIFIC
        RESTAURANT HOLDINGS, INC.

      STOCK
        OPTION AGREEMENT

    

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (e)

            	
              You
                consent to the collection, use and transfer of personal data as described
                in this Subsection. You understand and acknowledge that the Company,
                your
                employer and the Company’s other Subsidiaries hold certain personal
                information regarding you for the purpose of managing and administering
                the Plan, including (without limitation) your name, home address,
                telephone number, date of birth, social insurance number, salary,
                nationality, job title, any Shares or directorships held in the Company
                and details of all options or any other entitlements to Shares awarded,
                canceled, exercised, vested, unvested or outstanding in the your
                favor
                (the “Data”). You further understand and acknowledge that the Company
                and/or its Subsidiaries will transfer Data among themselves as necessary
                for the purpose of implementation, administration and management
                of your
                participation in the Plan and that the Company and/or any Subsidiary
                may
                each further transfer Data to any third party assisting the Company
                in the
                implementation, administration and management of the Plan. You understand
                and acknowledge that the recipients of Data may be located in the
                United
                States or elsewhere. You authorize such recipients to receive, possess,
                use, retain and transfer Data, in electronic or other form, for the
                purpose of administering your participation in the Plan, including
                a
                transfer to any broker or other third party with whom you elect to
                deposit
                Shares acquired under the Plan of such Data as may be required for
                the
                administration of the Plan and/or the subsequent holding of Shares
                on your
                behalf. You may, at any time, view the Data, require any necessary
                modifications of Data or withdraw the consents set forth in this
                Subsection by contacting the Human Resources Department of the Company
                in
                writing.

            


    

     

    SECTION 20. APPLICABLE
      LAW.

     

    This
      Agreement will be interpreted and enforced under the laws of the State of
      California (without regard to their choice of law provisions).

     

    
      PACIFIC
        RESTAURANT HOLDINGS, INC.

      STOCK
        OPTION AGREEMENT

      
        
          
          

        

        
          -7-

          
            

          

        

        
          
          

        

         

      

    

    EXHIBIT A

     

    
      PACIFIC
        RESTAURANT HOLDINGS, INC.

    

     

    2007
      STOCK INCENTIVE PLAN

     

    NOTICE
      OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT

     

    THIS
      AGREEMENT is dated as of ___________, ____, between Pacific
      Restaurant Holdings, Inc.
      (the
“Company”), and [Name
      of Optionee]
      (“Purchaser”).

     

    WITNESSETH:

     

    WHEREAS,
      the Company granted Purchaser a stock option on __________ (the “Date of Grant”)
      pursuant to a stock option agreement (the “Option Agreement”) under which
      Purchaser has the right to purchase up to [Number
      of Shares]
      shares
      of the Company’s common stock (the “Option Shares”); and

     

    WHEREAS,
      the Option is exercisable with respect to certain of the Option Shares as of
      the
      date hereof; and

     

    WHEREAS,
      pursuant to the Option Agreement, Purchaser desires to purchase shares of the
      Company as herein described, on the terms and conditions set forth in this
      Agreement, the Option Agreement and the Pacific
      Restaurant Holdings, Inc.
      2007
      Stock Incentive Plan (the “Plan”). Certain capitalized terms used in this
      Agreement are defined in the Plan.

     

    NOW,
      THEREFORE, it is agreed between the parties as follows:

     

    SECTION 1. PURCHASE
      OF SHARES.

     

    
      	 	
              (a)

            	
              Pursuant
                to the terms of the Option Agreement, Purchaser hereby agrees to
                purchase
                from the Company and the Company agrees to sell and issue to Purchaser
                _________
                shares of the Company’s common stock (the “Common Stock”) for the Exercise
                Price per share specified in the Notice of Stock Option Grant payable
                by
                personal check, cashier’s check, money order or otherwise as permitted by
                the Option Agreement. Payment shall be delivered at the Closing,
                as such
                term is defined below.

            


    

     

    
      	 	
              (b)

            	
              The
                closing (the “Closing”) under this Agreement shall occur at the offices of
                the Company as of the date hereof, or such other time and place as
                may be
                designated by the Company (the “Closing
                Date”).

            


    

     

    SECTION 2. ADJUSTMENT
      OF SHARES.

     

    Subject
      to the provisions of the Certificate of Incorporation of the Company, if
      (a) there is any stock dividend or liquidating dividend of cash and/or
      property, stock split or other change in the character or amount of any of
      the
      outstanding securities of the Company, or (b) there is any consolidation,
      merger or sale of all or substantially all of the assets of the Company, then,
      in such event, any and all new, substituted or additional securities or other
      cash or property to which Purchaser is entitled by reason of Purchaser’s
      ownership of the shares shall be immediately subject to the Right of First
      Refusal, as defined below, with the same force and effect as the shares subject
      to the Right of First Refusal. Appropriate adjustments shall be made to the
      number and/or class of shares subject to the Right of First Refusal to reflect
      the exchange or distribution of such securities. In the event of a merger or
      consolidation of the Company with or into another entity or any other corporate
      reorganization, the Right of First Refusal may be exercised by the Company’s
      successor.

    
      


      PACIFIC
        RESTAURANT HOLDINGS, INC. 

      EXHIBIT
        A
        TO STOCK OPTION AGREEMENT

      NOTICE
        OF
        EXERCISE AND COMMON STOCK PURCHASE AGREEMENT

    

    
      
        
        

      

      
        A-1

        
          

        

      

      
        
        

      

    

     

    SECTION 3. THE
      COMPANY’S RIGHT OF FIRST REFUSAL.

     

    Before
      any shares of Common Stock registered in the name of Purchaser may be sold
      or
      transferred, such shares shall first be offered to the Company as follows (the
      “Right of First Refusal”):

     

    
      	 	
              (a)

            	
              Purchaser
                shall promptly deliver a notice (“Notice”) to the Company stating
                (i) Purchaser’s bona fide intention to sell or transfer such shares,
                (ii) the number of such shares to be sold or transferred, and the
                basic terms and conditions of such sale or transfer, (iii) the price
                for which Purchaser proposes to sell or transfer such shares,
                (iv) the name of the proposed purchaser or transferee, and
                (v) proof satisfactory to the Company that the proposed sale or
                transfer will not violate any applicable U.S. federal, state or foreign
                securities laws. The Notice shall be signed by both Purchaser and
                the
                proposed purchaser or transferee and must constitute a binding commitment
                subject to the Company’s Right of First Refusal as set forth
                herein.

            


    

     

    
      	 	
              (b)

            	
              Within
                thirty (30) days after receipt of the Notice, the Company may elect
                to
                purchase all or any portion of the shares to which the Notice refers,
                at
                the price per share specified in the Notice. If the Company elects
                not to
                purchase all or any portion of the shares, the Company may assign
                its
                right to purchase all or any portion of the shares. The assignees
                may
                elect within thirty (30) days after receipt by the Company of the
                Notice
                to purchase all or any portion of the shares to which the Notice
                refers,
                at the price per share specified in the Notice. An election to purchase
                shall be made by written notice to Purchaser. Payment for shares
                purchased
                pursuant to this Section 3 shall be made within thirty (30) days
                after receipt of the Notice by the Company and, at the option of
                the
                Company, may be made by cancellation of all or a portion of outstanding
                indebtedness, if any, or in cash or
                both.

            


    

     

    
      	 	
              (c)

            	
              If
                all or any portion of the shares to which the Notice refers are not
                elected to be purchased, as provided in subparagraph 3(b), Purchaser
                may sell those shares to any person named in the Notice at the price
                specified in the Notice, provided that such sale or transfer is
                consummated within sixty (60) days of the date of said Notice to
                the
                Company, and provided, further, that any such sale is made in compliance
                with applicable U.S. federal, state and foreign securities laws and
                not in
                violation of any other contractual restrictions to which Purchaser
                is
                bound. The third-party purchaser shall be bound by, and shall acquire
                the
                shares of stock subject to, the provisions of this Agreement, including
                the Company’s Right of First
                Refusal.

            


    

     

    
      PACIFIC
        RESTAURANT HOLDINGS, INC. 

      EXHIBIT
        A
        TO STOCK OPTION AGREEMENT

      NOTICE
        OF
        EXERCISE AND COMMON STOCK PURCHASE AGREEMENT

    

    
      
        
        

      

      
        A-2

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (d)

            	
              Any
                proposed transfer on terms and conditions different from those set
                forth
                in the Notice, as well as any subsequent proposed transfer shall
                again be
                subject to the Company’s Right of First Refusal and shall require
                compliance with the procedures described in this
                Section 3.

            


    

     

    
      	 	
              (e)

            	
              Purchaser
                agrees to cooperate affirmatively with the Company, to the extent
                reasonably requested by the Company, to enforce rights and obligations
                pursuant to this Agreement.

            


    

     

    
      	 	
              (f)

            	
              Notwithstanding
                the above, neither the Company nor any assignee of the Company under
                this
                Section 3 shall have any right under this Section 3 at any time
                subsequent to the closing of a public offering of the common stock
                of the
                Company pursuant to a registration statement declared effective under
                the
                U.S. Securities Act of 1933, as amended (the “Securities
                Act”).

            


    

     

    
      	 	
              (g)

            	
              This
                Section 3 shall not apply to (i) a transfer by will or intestate
                succession, or (ii) a transfer to one or more members of Purchaser’s
                Immediate Family (defined below) or to a trust established by Purchaser
                for the benefit of Purchaser and/or one or more members of Purchaser’s
                Immediate Family, provided that the transferee agrees in writing
                on a form
                prescribed by the Company to be bound by all of the provisions of
                this
                Agreement to the same extent as they apply to Purchaser. The transferee
                shall execute a copy of the attached Annex
                I
                and file the same with the Secretary of the Company. For purposes
                of this
                Agreement, Immediate Family means any child, stepchild, grandchild,
                parent, stepparent, grandparent, spouse, sibling, mother-in-law,
                father-in-law, son-in-law, daughter-in-law, brother-in-law or
                sister-in-law, and shall include adoptive
                relationships.

            


    

     

    SECTION 4. PURCHASER’S
      RIGHTS AFTER EXERCISE OF RIGHT OF FIRST REFUSAL.

     

    If
      the
      Company makes available, at the time and place and in the amount and form
      provided in this Agreement, the consideration for the Common Stock to be
      repurchased in accordance with the provisions of Section 3 of this
      Agreement, then from and after such time the person from whom such shares are
      to
      be repurchased shall no longer have any rights as a holder of such shares (other
      than the right to receive payment of such consideration in accordance with
      this
      Agreement). Such shares shall be deemed to have been repurchased in accordance
      with the applicable provisions hereof, whether or not the certificate(s)
      therefor have been delivered as required by this Agreement.

    
       

      PACIFIC
        RESTAURANT HOLDINGS, INC. 

      EXHIBIT
        A
        TO STOCK OPTION AGREEMENT

      NOTICE
        OF
        EXERCISE AND COMMON STOCK PURCHASE AGREEMENT

    

    
      
        
        

      

      
        A-3

        
          

        

      

      
        
        

      

    

     

    SECTION 5. LEGEND
      OF SHARES.

     

    All
      certificates representing the Common Stock purchased under this Agreement shall,
      where applicable, have endorsed thereon the following legends and any other
      legends required by applicable securities laws:

     

    THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED OR QUALIFIED
      UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
      ANY
      STATE OR FOREIGN JURISDICTION, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED
      AND QUALIFIED PURSUANT TO THE RELEVANT PROVISIONS OF U.S. FEDERAL AND STATE
      OR
      APPLICABLE FOREIGN SECURITIES LAWS OR IF THE COMPANY IS PROVIDED AN OPINION
      OF
      COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION AND QUALIFICATION UNDER
      U.S. FEDERAL AND STATE OR APPLICABLE FOREIGN SECURITIES LAWS IS NOT
      REQUIRED.

     

    THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED,
      ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS
      OF
      A WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE INITIAL HOLDER HEREOF. SUCH
      AGREEMENT PROVIDES FOR CERTAIN TRANSFER RESTRICTIONS, INCLUDING RIGHTS OF FIRST
      REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SECURITIES. THE SECRETARY OF THE
      COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER
      HEREOF WITHOUT CHARGE.

     

    If
      the Option is an ISO, then the following legend should be
      included:

     

    THE
      SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED UPON EXERCISE OF AN INCENTIVE
      STOCK OPTION, AND THE COMPANY MUST BE NOTIFIED IF THE SHARES SHALL BE
      TRANSFERRED BEFORE THE LATER OF THE TWO (2) YEAR ANNIVERSARY OF THE DATE OF
      GRANT OF THE OPTION OR THE ONE (1) YEAR ANNIVERSARY OF THE DATE ON WHICH THE
      OPTION WAS EXERCISED. THE REGISTERED HOLDER MAY RECOGNIZE ORDINARY INCOME IF
      THE
      SHARES ARE TRANSFERRED BEFORE SUCH DATE.

     

    SECTION 6. PURCHASER’S
      INVESTMENT REPRESENTATIONS.

     

    
      	 	
              (a)

            	
              This
                Agreement is made with Purchaser in reliance upon Purchaser’s
                representation to the Company, which by Purchaser’s acceptance hereof
                Purchaser confirms, that the Common Stock which Purchaser will receive
                will be acquired with Purchaser’s own funds for investment for an
                indefinite period for Purchaser’s own account, not as a nominee or agent,
                and not with a view to the sale or distribution of any part thereof,
                and
                that Purchaser has no present intention of selling, granting participation
                in, or otherwise distributing the same, but subject, nevertheless,
                to any
                requirement of law that the disposition of Purchaser’s property shall at
                all times be within Purchaser’s control. By executing this Agreement,
                Purchaser further represents that Purchaser does not have any contract,
                understanding or agreement with any person to sell, transfer, or
                grant
                participation to such person or to any third person, with respect
                to any
                of the Common Stock.

            


    

    
      


      PACIFIC
        RESTAURANT HOLDINGS, INC. 

      EXHIBIT
        A
        TO STOCK OPTION AGREEMENT

      NOTICE
        OF
        EXERCISE AND COMMON STOCK PURCHASE AGREEMENT

    

    
      
        
        

      

      
        A-4

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (b)

            	
              Purchaser
                understands that the Common Stock will not be registered or qualified
                under applicable U.S. federal, state or foreign securities laws on
                the
                ground that the sale provided for in this Agreement is exempt from
                registration or qualification under applicable U.S. federal, state
                or
                foreign securities laws and that the Company’s reliance on such exemption
                is predicated on Purchaser’s representations set forth
                herein.

            


    

     

    
      	 	
              (c)

            	
              Purchaser
                agrees that in no event shall Purchaser make a disposition of any
                of the
                Common Stock (including a disposition under Section 3 of this
                Agreement), unless and until
                (i) Purchaser
                shall have notified the Company of the proposed disposition and shall
                have
                furnished the Company with a statement of the circumstances surrounding
                the proposed disposition and
                (ii) Purchaser
                shall have furnished the Company with an opinion of counsel satisfactory
                to the Company to the effect that
                (A) such
                disposition will not require registration or qualification of such
                Common
                Stock under applicable U.S. federal, state or foreign securities
                laws
                or
                (B) appropriate
                action necessary for compliance with the applicable U.S. federal,
                state or
                foreign securities laws has been taken or
                (iii) the
                Company shall have waived, expressly and in writing, its rights under
                clauses (i) and (ii) of this
                Section.

            


    

     

    
      	 	
              (d)

            	
              With
                respect to a transaction occurring prior to such date as the Plan
                and
                Common Stock thereunder are covered by a valid Form S-8 or similar
                U.S.
                federal registration statement, this Subsection shall apply unless
                the
                transaction is covered by the exemption in California Corporations
                Code
                section 25102(o) or a similar broad-based exemption. In connection
                with the investment representations made herein, Purchaser represents
                that
                Purchaser is able to fend for himself or herself in the transactions
                contemplated by this Agreement, has such knowledge and experience
                in
                financial and business matters as to be capable of evaluating the
                merits
                and risks of Purchaser’s investment, has the ability to bear the economic
                risks of Purchaser’s investment and has been furnished with and has had
                access to such information as would be made available in the form
                of a
                registration statement together with such additional information
                as is
                necessary to verify the accuracy of the information supplied and
                to have
                all questions answered by the
                Company.

            


    

     

    
      	 	
              (e)

            	
              Purchaser
                understands that if the Company does not register with the U.S. Securities
                and Exchange Commission pursuant to section 12 of the U.S. Securities
                Exchange Act of 1934, as amended, or if a registration statement
                covering
                the Common Stock (or a filing pursuant to the exemption from registration
                under Regulation A of the Securities Act) under the Securities Act
                is not
                in effect when Purchaser desires to sell the Common Stock, Purchaser
                may
                be required to hold the Common Stock for an indeterminate period.
                Purchaser also acknowledges that Purchaser understands that any sale
                of
                the Common Stock which might be made by Purchaser in reliance upon
                Rule
                144 under the Securities Act may be made only in limited amounts
                in
                accordance with the terms and conditions of that
                Rule.

            


    

    
       

      PACIFIC
        RESTAURANT HOLDINGS, INC. 

      EXHIBIT
        A
        TO STOCK OPTION AGREEMENT

      NOTICE
        OF
        EXERCISE AND COMMON STOCK PURCHASE AGREEMENT

      
        
          
          

        

        
          A-5

          
            

          

        

        
          
          

        

      

    

     

    SECTION 7. NO
      DUTY TO TRANSFER IN VIOLATION OF THIS AGREEMENT.

     

    The
      Company shall not be required (a) to transfer on its books any shares of
      Common Stock of the Company which shall have been sold or transferred in
      violation of any of the provisions set forth in this Agreement or (b) to
      treat as owner of such shares or to accord the right to vote as such owner
      or to
      pay dividends to any transferee to whom such shares shall have been so
      transferred.

     

    SECTION 8. RIGHTS
      OF PURCHASER.

     

    
      	 	
              (a)

            	
              Except
                as otherwise provided herein, Purchaser shall, during the term of
                this
                Agreement, exercise all rights and privileges of a stockholder of
                the
                Company with respect to the Common
                Stock.

            


    

     

    
      	 	
              (b)

            	
              Nothing
                in this Agreement shall be construed as a right by Purchaser to be
                retained by the Company, or a parent or subsidiary of the Company
                in any
                capacity. The Company reserves the right to terminate Purchaser’s Service
                at any time and for any reason without thereby incurring any liability
                to
                Purchaser.

            


    

     

    SECTION 9. RESALE
      RESTRICTIONS/MARKET STAND-OFF.

     

    Purchaser
      hereby agrees that in connection with any underwritten public offering by the
      Company of its equity securities pursuant to an effective registration statement
      filed under the Securities Act, including the Company’s initial public offering,
      Purchaser shall not, directly or indirectly, engage in any transaction
      prohibited by the underwriter, or sell, make any short sale of, contract to
      sell, transfer the economic risk of ownership in, loan, hypothecate, pledge,
      grant any option for the purchase of, or otherwise dispose or transfer for
      value
      or agree to engage in any of the foregoing transactions with respect to any
      Common Stock without the prior written consent of the Company or its
      underwriters, for such period of time after the effective date of such
      registration statement as may be requested by the Company or such underwriters.
      Such period of time shall not exceed one hundred eighty (180) days and may
      be
      required by the underwriter as a market condition of the offering; provided,
      however, that if either (a) during the last seventeen (17) days of such one
      hundred eighty (180) day period, the Company issues an earnings release or
      material news or a material event relating to the Company occurs or (b) prior
      to
      the expiration of such one hundred eighty (180) day period, the Company
      announces that it will release earnings results during the sixteen (16) day
      period beginning on the last day of the one hundred eighty (180) day period,
      then the restrictions imposed during such one hundred eighty (180) day period
      shall continue to apply until the expiration of the eighteen (18) day period
      beginning on the issuance of the earnings release or the occurrence of the
      material news or material event; provided, further, that in the event the
      Company or the underwriter requests that the one hundred eighty (180) day period
      be extended or modified pursuant to then-applicable law, rules, regulations
      or
      trading policies, the restrictions imposed during the one hundred eighty (180)
      day period shall continue to apply to the extent requested by the Company or
      the
      underwriter to comply with such law, rules, regulations or trading policies.
      Purchaser hereby agrees to execute and deliver such other agreements as may
      be
      reasonably requested by the Company or the underwriter which are consistent
      with
      the foregoing or which are necessary to give further effect thereto. To enforce
      the provisions of this Section, the Company may impose stop-transfer
      instructions with respect to the Common Stock until the end of the applicable
      stand-off period.

    
      


      PACIFIC
        RESTAURANT HOLDINGS, INC. 

      EXHIBIT
        A
        TO STOCK OPTION AGREEMENT

      NOTICE
        OF
        EXERCISE AND COMMON STOCK PURCHASE AGREEMENT

    

    
      
        
        

      

      
        A-6

        
          

        

      

      
        
        

      

    

     

    SECTION 10. OTHER
      NECESSARY ACTIONS.

     

    The
      parties agree to execute such further instruments and to take such further
      action as may reasonably be necessary to carry out the intent of this
      Agreement.

     

    SECTION 11. NOTICE.

     

    Any
      notice required or permitted under this Agreement shall be given in writing
      and
      shall be deemed effectively given upon the earliest of personal delivery,
      receipt or the third full day following deposit in the United States Post Office
      with postage and fees prepaid, addressed to the other party hereto at the
      address last known or at such other address as such party may designate by
      ten
      (10) days’ advance written notice to the other party hereto.

     

    SECTION 12. SUCCESSORS
      AND ASSIGNS.

     

    This
      Agreement shall inure to the benefit of the successors and assigns of the
      Company and, subject to the restrictions on transfer herein set forth, be
      binding upon Purchaser and Purchaser’s heirs, executors, administrators,
      successors and assigns. The failure of the Company in any instance to exercise
      the Right of First Refusal described herein shall not constitute a waiver of
      any
      other Right of First Refusal that may subsequently arise under the provisions
      of
      this Agreement. No waiver of any breach or condition of this Agreement shall
      be
      deemed to be a waiver of any other or subsequent breach or condition, whether
      of
      a like or different nature.

     

    SECTION 13. APPLICABLE
      LAW.

     

    This
      Agreement shall be governed by, and construed in accordance with, the laws
      of
      the State of California, as such laws are applied to contracts entered into
      and
      performed in such state.

     

    SECTION 14. NO
      STATE QUALIFICATION.

     

    THE
      SALE
      OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED
      WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, AND THE
      ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
      CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE
      SALE
      OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105
      OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT
      ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE
      SALE IS SO EXEMPT.

    
      


      PACIFIC
        RESTAURANT HOLDINGS, INC. 

      EXHIBIT
        A
        TO STOCK OPTION AGREEMENT

      NOTICE
        OF
        EXERCISE AND COMMON STOCK PURCHASE AGREEMENT

    

    
      
        
        

      

      
        A-7

        
          

        

      

      
        
        

      

    

     

    SECTION 15. NO
      ORAL MODIFICATION.

     

    No
      modification of this Agreement shall be valid unless made in writing and signed
      by the parties hereto.

     

    SECTION 16. ENTIRE
      AGREEMENT.

     

    This
      Agreement, the Option Agreement and the Plan constitute the entire complete
      and
      final agreement between the parties hereto with regard to the subject matter
      hereof.

     

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

     

    
      	
              PACIFIC
                RESTAURANT HOLDINGS, INC.

            	 	 	
              [NAME
                OF OPTIONEE]
                (PURCHASER)

            
	 	 	 	 
	 	 	 	 
	By	 	 	
            
	
              
                

              

               

              Its

              
                

              

            	 	 	
              

              Signature

            


    

     

    
      PACIFIC
        RESTAURANT HOLDINGS, INC. 

      EXHIBIT
        A
        TO STOCK OPTION AGREEMENT

      NOTICE
        OF
        EXERCISE AND COMMON STOCK PURCHASE AGREEMENT


      
        
          
          

        

        
          A-8

          
            

          

        

        
          
          

        

      

    

     

    ANNEX
      I

     

    ACKNOWLEDGMENT
      OF AND AGREEMENT TO BE BOUND

    BY
      THE NOTICE OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT


    OF

    PACIFIC
      RESTAURANT HOLDINGS, INC.

     

    The
      undersigned, as transferee of shares of Pacific
      Restaurant Holdings, Inc. hereby
      acknowledges that he or she has read and reviewed the terms of the Notice of
      Exercise and Common Stock Purchase Agreement of
      Pacific
      Restaurant Holdings, Inc. and
      hereby agrees to be bound by the terms and conditions thereof, as if the
      undersigned had executed said Agreement as an original party
      thereto.

     

    Dated:
      ____________________, ____.

     

    
      	 	 	 	 
	
            	 	 	
              

              (Signature
                of Transferee)

            
	
            	 	 	
            
	 	 	 	
              

              (Printed
                Name of Transferee)

            


    

     

    
      PACIFIC
        RESTAURANT HOLDINGS, INC.

      ANNEX I

      TO
        NOTICE
        OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

    

    EXHIBIT B

     

    U.S.
      FEDERAL TAX INFORMATION

     

    (Current
      as of October 2007)

     

    The
      following memorandum briefly summarizes current U.S. federal income tax law.
      The
      discussion is intended to be used solely for general information purposes and
      does not make specific representations to any participant. A taxpayer’s
      particular situation may be such that some variation of the basic rules is
      applicable to him or her. In addition, the U.S. federal income tax laws and
      regulations are revised frequently and may change again in the future. Each
      participant is urged to consult a tax advisor, both with respect to U.S. federal
      income tax consequences as well as any foreign, state or local tax consequences,
      before exercising any option or before disposing of any shares of stock acquired
      under the Plan.

     

    Initial
      Grant of Options

     

    The
      grant
      of an option, whether a nonqualified or nonstatutory stock option (“NSO”) or an
      incentive stock option (“ISO”), is not a taxable event for the optionee, and the
      Company obtains no deduction for the grant of the option. Note, however, that
      under new Section 409A of the Internal Revenue Code, which is generally
      effective January 1, 2005, options granted at a discount from fair market value
      may be considered “deferred compensation” subject to adverse tax consequences,
      including immediate income tax upon the vesting of the option (whether or not
      exercised) and a 20% tax penalty.

     

    Nonqualified
      or Nonstatutory Stock Options

     

    The
      exercise of an NSO is a taxable event to the optionee. The amount by which
      the
      fair market value of the shares on the date of exercise exceeds the exercise
      price (the “spread”) will be taxed to the optionee as ordinary income. The
      spread will also be considered “wages” for purposes of FICA taxes. The Company
      will be entitled to a deduction in the same amount as the ordinary income
      recognized by the optionee from the exercise of the option that is reported
      to
      the IRS by the optionee or the Company. In general, the optionee’s tax basis in
      the shares acquired by exercising an NSO is equal to the fair market value
      of
      such shares on the date of exercise. Upon a subsequent sale of any such shares
      in a taxable transaction, the optionee will realize capital gain or loss
      (long-term or short-term, depending on whether the shares were held for the
      required holding period before the sale) in an amount equal to the difference
      between his or her basis in the shares and the sale price.

    

      Internal
        Revenue Service regulations generally provide that, for the purpose of avoiding
        federal tax penalties, a taxpayer may rely only on formal written advice
        meeting
        specific requirements. The tax discussion in this document does not meet
        those
        requirements. Accordingly, the tax discussion was not intended or written
        to be
        used, and it cannot be used, for the purpose of avoiding federal tax penalties
        that may be imposed on you. Further, the tax discussion in this document
        could
        be considered to support the promotion or marketing of the transaction or
        matter
        discussed herein. You and any other person reading the tax discussion should
        seek advice based on his, her or its particular circumstances from an
        independent tax advisor.

    

    
      
        
        

      

      
        B-1

        
          

        

      

      
        
        

      

    

     

    The
      capital gains holding periods are complex. If shares are held for more than
      one
      year, the maximum tax rate on the gain has been reduced from twenty percent
      (20%) to fifteen percent (15%) for gain recognized on or after May 6, 2003,
      and before January 1, 2011. Because the rules are complex and can vary in
      individual circumstances, each participant should consider consulting his or
      her
      own tax advisor.

     

    If
      an
      optionee exercises an NSO and pays the exercise price with previously acquired
      shares of stock, special rules apply. The transaction is treated as a tax-free
      exchange of the old shares for the same number of new shares, except as
      described below with respect to shares acquired pursuant to ISOs. The optionee’s
      basis in the new shares is the same as his or her basis in the old shares,
      and
      the capital gains holding period runs without interruption from the date when
      the old shares were acquired. The value of any new shares received by the
      optionee in excess of the number of old shares surrendered minus any cash the
      optionee pays for the new shares will be taxed as ordinary income. The
      optionee’s basis in the additional shares is equal to the fair market value of
      such shares on the date the shares were transferred, and the capital gain
      holding period commences on the same date. The effect of these rules is to
      defer
      recognition of any gain in the old shares when those shares are used to buy
      new
      shares. Stated differently, these rules allow an optionee to finance the
      exercise of an NSO by using shares of stock that he or she already owns, without
      paying current tax on any unrealized appreciation in those old
      shares.

     

    Incentive
      Stock Options

     

    The
      holder of an ISO will not be subject to U.S. federal income tax upon the
      exercise of the ISO, and the Company will not be entitled to a tax deduction
      by
      reason of such exercise, provided that the holder is employed by the Company
      on
      the exercise date (or the holder’s employment terminated within the three (3)
      months preceding the exercise date). Exceptions to this exercise timing
      requirement apply in the event the optionee dies or becomes disabled. A
      subsequent sale of the shares received upon the exercise of an ISO will result
      in the realization of long-term capital gain or loss in the amount of the
      difference between the amount realized on the sale and the exercise price for
      such shares, provided that the sale occurs more than one (1) year after the
      exercise of the ISO and
      more
      than two (2) years after the grant of the ISO. In general, if a sale or
      disposition of the shares occurs prior to satisfaction of the foregoing holding
      periods (referred to as a “disqualifying disposition”), the optionee will
      recognize ordinary income and the Company will be entitled to a corresponding
      deduction, generally equal to the amount of ordinary income recognized by the
      optionee from the disqualifying disposition that is reported to the IRS by
      the
      optionee or the Company.

     

    Favorable
      tax treatment is accorded to an optionee only to the extent that the value
      of
      the shares (determined at the time of grant) covered by an ISO first exercisable
      in any single calendar year does not exceed one hundred thousand dollars
      ($100,000). If ISOs for shares whose aggregate value exceeds one hundred
      thousand dollars ($100,000) become exercisable in the same calendar year, the
      excess will be treated as NSOs.

     

    A
      special
      rule applies if an optionee pays all or part of the exercise price of an ISO
      by
      surrendering shares of stock that he or she previously acquired by exercising
      any other ISO. If the optionee has not held the old shares for the full duration
      of the applicable holding periods, then the surrender of such shares to fund
      the
      exercise of the new ISO will be treated as a disqualifying disposition of the
      old shares. As described above, the result of a disqualifying disposition is
      the
      loss of favorable tax treatment with respect to the acquisition of the old
      shares pursuant to the previously exercised ISO.

    

      PASSPORT
        RESTAURANTS, INC.

      EXHIBIT
        B
        TO STOCK OPTION AGREEMENT

      U.S.
        FEDERAL TAX INFORMATION

    

    
      
        
        

      

      
        B-2

        
          

        

      

      
        
        

      

    

     

    Where
      the
      applicable holding period requirements have been met, the use of previously
      acquired shares of stock to pay all or a portion of the exercise price of an
      ISO
      may offer significant tax advantages. In particular, a deferral of the
      recognition of any appreciation in the surrendered shares is available in the
      same manner as discussed above with respect to NSOs.

     

    Alternative
      Minimum Tax

     

    Alternative
      minimum tax is paid when such tax exceeds a taxpayer’s regular U.S. federal
      income tax. Alternative minimum tax is calculated based on alternative minimum
      taxable income, which is taxable income for U.S. federal income tax purposes,
      modified by certain adjustments and increased by tax preference
      items.

     

    The
      “spread” under an ISO—that is, the difference between (a) the fair market
      value of the shares of stock at exercise and (b) the exercise price—is
      classified as alternative minimum taxable income for the year of exercise.
      Alternative minimum taxable income may be subject to the alternative minimum
      tax. However, if the shares of stock purchased upon the exercise of an ISO
      are
      sold in the same taxable year in which they are acquired, then the amount
      includible in the taxpayer’s alternative minimum taxable income will in no event
      exceed the amount realized upon such sale less the option exercise price paid
      for those shares.

     

    In
      general, when a taxpayer sells stock acquired through the exercise of an ISO,
      only the difference between the fair market value of the shares on the date
      of
      exercise and the date of sale is used in computing any alternative minimum
      tax
      for the year of the sale. The portion of a taxpayer’s alternative minimum tax
      attributable to certain items of tax preference (including the spread upon
      the
      exercise of an ISO) can be credited against the taxpayer’s regular liability in
      later years subject to certain limitations.

     

    Withholding
      Taxes

     

    Exercise
      of an NSO produces taxable income which is subject to withholding. The Company
      will not deliver shares to the optionee unless the optionee has agreed to
      satisfactory arrangements for meeting all applicable U.S. federal, state and
      local withholding tax requirements.

     

    U.S.
      federal tax law does not require unrecognized gain on exercise of an ISO to
      be
      treated as “wages” for the purposes of FICA taxes.

     

    THIS
      TAX SUMMARY IS GENERAL IN NATURE AND SHOULD NOT BE RELIED UPON BY ANY PERSON
      IN
      DECIDING WHETHER OR WHEN TO EXERCISE AN OPTION. EACH PERSON SHOULD CONSULT
      HIS
      OR HER OWN TAX ADVISOR REGARDING THESE MATTERS.

    

      PASSPORT
        RESTAURANTS, INC.

      EXHIBIT
        B
        TO STOCK OPTION AGREEMENT

      U.S.
        FEDERAL TAX INFORMATION

    

    
      
        
        

      

      
        B-3